Chinese Outward Foreign Direct Investment Research Articles

Determinants of Chinese energy OFDI location decisions and entry failure risk: The roles of public diplomacy endeavors and firm investment strategies

Determinants of Chinese energy OFDI location decisions and entry failure risk: The roles of public diplomacy endeavors and firm investment strategies

The “Debt Trap” or the “Benefit Pie” View of China’s Belt and Road Initiative on Host Countries: Evidence from Chinese Enterprises’ Outward Foreign Direct Investment

ABSTRACT The Belt and Road Initiative (BRI) attracts many Chinese multinational enterprises (MNEs) to invest abroad, but China’s intention behind this policy has raised heated disputes. Drawing on an institution-based view and theories of emerging market multinational enterprises (EMNEs), we analyze whether the initiative undermines host countries’ financial conditions through outward foreign direct investment (OFDI). Using the time-varying Difference-in-Differences model based on Chinese enterprises’ investment data from 2009 to 2020, we find the BRI facilitates Chinese OFDI to host countries but with no significant increase in distressed debt. Chinese OFDI eschews heavily indebted countries and shows little relevance to the growth of the BRI countries’ non-repayable debt, which contradicts the “debt-trap” argument.

Location choice of Chinese outward FDI – An ethnicity-based population ecology perspective

Drawing on population ecology theory (PET) which conceptualizes an individual organization's survival as a result of organizational changes at the population level, we explain why multinational enterprises (MNEs) from emerging markets prefer to enter countries with an existing population of co-national peers. Our study of a sample of Chinese MNEs shows that the size of co-national MNEs population in the host country has a positive effect on new FDI entries by firms from the same home country. Interestingly, the co-province and co-industry-formed organizational population in the host country has an inverted U-shaped effect on the new FDI entries, and that provincial dialect and co-national immigrants flatten this curvilinear effect. We also analyze how the focal relationships vary between host countries with different levels of economic development and between different industries. Our study contributes to the research of FDI location choices by providing a population ecology-based explanation that differs fundamentally from those based on agglomeration economics and institutional theory. The study also advances PET by theorizing how legitimizing and competing forces interact to jointly influence the way the extant population of certain types of organizations influences the entries of the same type of organizations into the population.

Influence of renewable energy infrastructure, Chinese outward FDI, and technical efficiency on ecological sustainability in belt and road node economies

Renewable energy infrastructure is highly interrelated to environmental sustainability and the accomplishment of sustainable development goals. A significant portion of China's outward foreign direct investment (FDI) has been allocated to energy production and transmission across the Belt and Road Initiative (BRI) region. Therefore, we examine the influence of renewable energy infrastructure, China's outward FDI, and the host country's technical efficiency on ecological sustainability. This research uses the cross-sectional autoregressive distributive lag (CS-ARDL) model to address the issues of parameter and cross-sectional heterogeneity. The findings show that renewable energy infrastructure and technical efficiency significantly reduce carbon emissions in the long run. Likewise, FDI inflows and economic growth increase emissions in the BRI region due to higher energy consumption. Moreover, the direct effect of FDI on environmental quality is negative, while the indirect impact through moderation of FDI and renewable energy infrastructure leads to lower emissions. These results implied that the reallocation of inward FDI in energy infrastructure neutralizes the negative consequences, improves energy efficiency, and resultantly lower emissions. Therefore, it opens new policy implications that we focus more on investing FDI in the energy infrastructure sector.

Study on the Impact of Host Country ICT Development Level on China's OFDI Efficiency

The connotation of ownership advantages driving Chinese OFDI in the context of the IT revolution has changed significantly, and the level of ICT development in host countries may become a new type of locational advantage to attract foreign investment. In this paper, we investigate the impact of host country ICT advantage on Chinese OFDI and measure the efficiency of Chinese investment in 108 host countries from 2006 to 2015 with the help of the time-varying stochastic frontier gravity model, and empirically test the factors affecting investment efficiency, focusing on the impact of host country ICT development level on Chinese OFDI efficiency. It is found that overall the level of ICT development in host countries promotes the efficiency of Chinese OFDI; after distinguishing the sample into developed and developing countries, the level of ICT development in host countries has a differential impact effect on the efficiency of Chinese OFDI. This study helps us to better understand the relationship between Chinese OFDI and the ICT development level of host countries, and it has important insights for constructing new advantages in outward investment cooperation and improving the efficiency of outward FDI.

The Impact of Institutional Distance on Innovation Performance in Chinese Reverse OFDI: Moderating Effects of Cultural Distance and Internationalization Experience

The Impact of Institutional Distance on Innovation Performance in Chinese Reverse OFDI: Moderating Effects of Cultural Distance and Internationalization Experience

The impact of China’s outward foreign direct investment on its export similarity with belt and road countries

This study investigates the impact of China’s outward foreign direct investment (OFDI) on the export similarity (EXSI) between China and the countries along the Belt and Road by using an unbalanced panel dataset involving 64 Belt and Road countries (BRCs) from 2003 to 2018. The empirical analysis indicates that China’s OFDI has a positive impact on the EXSIs of commodities as a whole. Specifically, it finds that Chinese OFDI has a positive impact on the EXSI of primary products but has a negative impact on the EXSIs of resource-based manufactures, low-technology manufactures, and medium-skill/high-skill and technology-intensive manufactures. Furthermore, by classifying the BRCs into resource-rich, low-income, and high-income groups, we find that China’s OFDI reduces the EXSIs of resource-intensive manufactures in resource-rich BRCs, low-technology manufacturesin low-income BRCs, and high-skill and technology-intensive manufactures in high-income BRCs. This finding is generally consistent with the resource endowments and comparative advantages of China and the BRCs. In addition, we find that since the launch of the Belt and Road Initiative, China’s OFDI has not only increasingly fostered the export dissimilarity (specialisation) of resource-intensive manufactures and labour-intensive manufactures between China and BRCs but also promoted the export upgrading of BRCs.

Institutional effects of Chinese OFDI under the Belt and Road Initiative: exporting the Chinese model?

China has frequently been accused of having negative institutional impacts on host countries through outward foreign direct investment (OFDI). This study argues that Chinese OFDI does not have the ability nor the wiliness to impact the host country’s institutions. It examines the hypotheses using panel data covering 161 countries over the period 2005–2020 and applies difference GMM regression techniques. The findings show that, first, Chinese OFDI has no significant institutional effects; second, there is no clear evidence shows the BRI has an impact on the institutional effects of Chinese OFDI. Further heterogeneity analysis supports these findings.

More policy is not always effective policy: How policy coherence affects firm internationalization

This paper aims to contribute to our understanding of the effects of home country policy change on the internationalization of EMNEs. Our analysis is based on a unique data set of Chinese outward FDI policies in 1979–2019 that enables us to examine policy coherence in three dimensions: signal ambiguity, instrument expansion, and scope expansion. By analyzing Chinese POEs between 2012 and 2018, we find that more ambiguous policy signals reduce the likelihood of cross-border M&As. Furthermore, we find that the expansion of policy instruments and policy scope also negatively affect internationalization. These effects become weaker over time, and a smaller sample of SOEs shows no susceptibility to instrument and scope expansion. We conclude that while the content of policy is essential, the coherence of the policy process can have an impact that may overwhelm the positive effects of policies if the firms lack policy awareness, or the implementation exceeds their short-term capacity to adjust. Thus, more policy is not always more effective policy. Availability of data and materialYes, in a repository (Utesch-Xiong, F., 2021. Chinese Outward Foreign Direct Investment Policies, 1979–2020, Harvardvese, https://doi.org/10.7910/DVN/ZJOTUN)

Labor protection, labor costs, and China's outward foreign direct investment

Considering the 2008 Labor Contract Law as a quasi-natural experiment, this paper constructs a double difference model to examine the relationships among labor protection, labor costs, and China's outward foreign direct investment (OFDI). First, we theoretically study the mechanism of the impacts of labor protection. Then, we empirically confirm that the 2008 Labor Law significantly increased China's OFDI, and that this effect is heterogeneous among different firms. Our empirical evidence further suggests that the law increased the probability of Chinese enterprises' OFDI by increasing firms' wages, fixed labor costs, and the level of labor protection.

Statement of Retraction: Why did they get in trouble? The influence of firm characteristics and institutional distance in the case of Chinese outward foreign direct investment

Statement of Retraction: Why did they get in trouble? The influence of firm characteristics and institutional distance in the case of Chinese outward foreign direct investment

Foreign direct investments in the BRICS countries and internationalization of Chinese capital

This article aims to analyze the economic integration of the BRICS countries through foreign direct investments (FDI) since the first summit of the group in 2009. The investigation shows that this integration is very asymmetric due to the preponderance of Chinese investments in other BRICS countries. Hence, the paper sets an associated objective, focusing on the evaluation of diverse patterns of internationalization of Chinese capital and its impact on the investments within the bloc. In line with these goals, the paper’s methodology involves several progressive steps. First of all, we are developing a data analysis of FDI in BRICS. Given the absolute dominance of China’s investments within the bloc, we are shifting the focus to these Chinese outward foreign direct investments (OFDI). In order to cope with this requirement, we are promoting qualitative and quantitative analysis. The qualitative analysis consists in the perception of heterogenous motivations that induce the internationalization of Chinese capital through examining the strategies of three groups of economic agents in China: (1) state-owned enterprises (SOE) operating in traditional sectors, (2) big companies preponderantly oriented on the domestic market, and (3) technology-based companies. The quantitative analysis lies in the scrutiny of the available data on Chinese investments in other BRICS countries. As a result, the main contribution of this article lies in the characterization of heterogeneous strategies of the internationalization of Chinese capital and their analysis within the framework of the asymmetric productive integration within BRICS.

Is the cure worse than the disease? The effect of emerging market MNEs on host country corruption

In recent years, there has been an exponential increase in the amount of foreign investment by emerging market multinational enterprises (EMNEs). While it has been debated whether EMNEs strengthen or weaken the institutions in host countries they invest in, the literature has paid limited attention to how EMNE investment impacts corruption in other emerging markets, one of the most significant destinations of EMNEs. Following Hoskisson et al. (2013), we categorize two types of emerging markets as targets of EMNE investment, a) low-income emerging markets and b) middle-income emerging markets, based on their institutional and market development. Building on the theory of firm-specific advantages (FSAs) and the institutional advantage (IA) of EMNEs, we reason that EMNEs enter foreign markets in accordance to where their skills and competencies can be effectively utilized, and this impacts corruption in the host country. We make two key arguments: (1) EMNEs predominantly use their IA in low-income emerging markets, which in the long term increases corruption in the host market, and (2) EMNEs predominantly use their FSAs to gain competitive advantage in middle-income emerging markets, which decreases corruption in the host market. Empirical analysis of Chinese outward FDI from the 2008-2018 period supports our hypotheses. Our research contributes to both the literature on EMNEs and corruption.

Research on the Environmental Effects of China’s Outward Foreign Direct Investment (OFDI): Empirical Evidence Based on the Implementation of the “Belt and Road” Initiative (BRI)

Based on the environmental responsibility of the home country against the background of high-quality development and the “double carbon” goal, with the aid of Difference-in-Differences (DIDs), this study discusses the impact of China’s outward foreign direct investment (OFDI) on the environment of the host country. The sample data of China’s OFDI from 2003 to 2020 is used to analyze its impact on the 162 countries before and after the implementation of the “Belt and Road” Initiative (BRI). The results show that the implementation of the BRI can effectively enhance the positive environmental impact of Chinese OFDI in host countries. Further research shows that with the implementation of the BRI, the environmental effects of Chinese OFDI in developing countries have become more significant. Among developing countries in Asia, the BRI has played a significant and positive role in promoting the environmental outcomes of China’s OFDI.

A Revisit of Motives for Chinese Outward Foreign Direct Investment: The Role of the Institution in Host Countries

This study explores how the institution of the host countries affects the natural resource-seeking and strategic asset-seeking motives of the Chinese outward foreign direct investment. Using the system GMM estimation method and data of the Chinese outward foreign direct investment during the period from 2003 to 2020, the study shows that the search for strategic assets by the Chinese outward foreign direct investment is directed toward the host countries with well-established institutions, while the search for natural resources is driven by poor institutions of the host countries. Findings from this study provide empirical evidence for policymakers to formulate appropriate foreign investment policies given the dynamics of Chinese foreign direct investment worldwide.

The Impact of the Belt and Road Initiative on the National Governance Level--Evidence from the Countries along the Belt and Road

The Belt and Road Initiative is the Chinese approach to improving global governance. Based on country-level panel data, the paper analyzes the promoting effect of the Belt and Road Initiative on the governance of countries along the route by using difference in difference method. First, our study finds that the implementation of the Belt and Road Initiative has significantly improved the governance level of the countries along the route, and this finding remains robust after a series of tests. Second, the mechanism study finds that the Belt and Road Initiative improves governance in Belt and Road countries by influencing Chinese outward foreign direct investment (FDI) and Internet penetration in the countries along the route. Finally, the moderating effect suggests that the Belt and Road Initiative has a more significant impact on governance in countries that are closer to China and receive more official development assistance. Further heterogeneity analysis reveals that the governance promotion effect of the policy is more pronounced for countries with lower levels of economic development, population density, merchandise trade, and FDI.

The Impact of the Belt and Road Initiative on the National Governance Level--Evidence from the Countries along the Belt and Road

The Belt and Road Initiative is the Chinese approach to improving global governance. Based on country-level panel data, the paper analyzes the promoting effect of the Belt and Road Initiative on the governance of countries along the route by using difference in difference method. First, our study finds that the implementation of the Belt and Road Initiative has significantly improved the governance level of the countries along the route, and this finding remains robust after a series of tests. Second, the mechanism study finds that the Belt and Road Initiative improves governance in Belt and Road countries by influencing Chinese outward foreign direct investment (FDI) and Internet penetration in the countries along the route. Finally, the moderating effect suggests that the Belt and Road Initiative has a more significant impact on governance in countries that are closer to China and receive more official development assistance. Further heterogeneity analysis reveals that the governance promotion effect of the policy is more pronounced for countries with lower levels of economic development, population density, merchandise trade, and FDI.

Institutional distance and Chinese investment efficiency in Africa: a stochastic frontier analysis

PurposeThis study aims to analyse the efficiency effects of institutional distance on Chinese outward foreign direct investment (FDI) in Africa.Design/methodology/approachThe study utilised the true fixed-effect stochastic frontier analysis (SFA) model. Data from 2003 to 2016 (14 years) were acquired from 42 targeted African countries, which are included in the analysis.FindingsThe results reveal that FDI flow efficiency can be maximised with a high institutional distance between China and African countries. Contrariwise, comparable institutional distance, measured by the rule of law, regulatory quality and government effectiveness between the host and home countries, reflected a significant positive impact for Chinese outward foreign direct investment (OFDIs), indicating Chinese MNEs can invest directly in a country with comparable institutional characteristics.Originality/valueThere have been limited exceptional studies that assessed the effect of institutional distance between emerging countries. However, none of these studies investigated the effect of institutional distance between China and Africa at a national level. Using the advantage of the SFA model, this study assesses the efficiency effects of institutional distance between the host and home country.

Does political risk undermine environment and economic development in Pakistan? Empirical evidence from China–Pakistan economic corridor

China–Pakistan Economic Corridor (CPEC) invests {text{US}} 62 billion in Pakistan’s energy, infrastructure, and other development projects to step toward Eurasia’s economic integration. However, CPEC may exacerbate climate change vulnerabilities for Pakistan’s struggling economy due to potential environmental hazards and consequences. In this context, the current study seeks to examine the impact of political risk on carbon emissions and economic growth in Pakistan while also considering the relevance of trade openness, Chinese outward Foreign Direct Investment (text{FDI}), and One Belt One Road left( text{OBOR} right) policy. To investigate this impact, we use the autoregressive distributed lag technique to cointegration and the fully modified ordinary least squares estimator for robustness results, using data spanning 2000,, {text{to }},,2020. Our empirical findings reveal that trade openness, FDI, and OBOR policy contribute to pollution and economic growth, but political stability slows the rate of environmental deterioration and increases economic growth. Furthermore, the existence of robust political stability mitigates the negative impacts of FDI and trade openness on the environment, while strong political stability aids the positive effects of FDI and trade openness on economic growth. Also, the findings confirmed that a better political environment promotes economic development while simultaneously lowering carbon emissions. Our results may assist the Government of Pakistan in transforming text{CPEC} into a model green text{OBOR} initiative in the region.

INFRASTRUCTURE-FDI CURSE AND INSTITUTIONAL QUALITY IN BELT AND ROAD HOST COUNTRIES

Most of the Belt and Road host Countries (B&RCs) have weak infrastructure and gained investor’s attention in infrastructure financing. This potential is mainly tapped by Chinese outward foreign direct investment (FDI) under the Belt and Road Initiative (BRI). Therefore, this study analyzes the role of institutions in explaining the infrastructure-FDI framework across the B&RCs from 2004 to 2019. Initially, it constructs composite infrastructure development and institutional quality indices to integrate their multidimensional attributes. Later, System Generalized Method of Moments estimator is employed, and it proposes three key findings. First, infrastructure development of the host country crowd-out Chinese outward FDI, indicating the presence of the infrastructure-FDI curse. Second, the host country’s institutional quality contributes to stimulating Chinese outward FDI and helps to mitigate the infrastructure-FDI curse. Third, the infrastructure-FDI curse (does not) holds in Post (Pre) Belt and Road period. These results offer valuable policy suggestions for participating B&RCs and highlight the region’s prevailing infrastructure gaps.